Scop: Working Capital, FX, and Cash Conversion, How Much Cash Really Remains After the Growth Year
Scop ended 2025 with NIS 154.0 million of net income but only NIS 30.7 million of operating cash flow. This follow-up isolates the gap between profit and cash, and shows that the stronger liquidity profile was built mainly through longer-term debt and fresh equity rather than cleaner conversion from earnings.
The main article already established the broad point: Scop can still grow, but the real test has moved from revenue to cash quality. This follow-up isolates the layer that matters most for that test, how much of 2025’s reported profit actually turned into cash, where working capital absorbed it, and why FX makes the read harder than the shekel numbers suggest at first glance.
Finding one: NIS 154.0 million of net income turned into only NIS 30.7 million of operating cash flow after NIS 164.6 million was absorbed by changes in assets and liabilities.
Finding two: Inventory days rose to 269 from 249, customer days to 64 from 61, and supplier days stayed at 32. On a simple operating-days basis, the cash cycle stretched to 301 days from 278.
Finding three: Liquidity looks stronger, NIS 510.5 million of cash, short-term investments, and marketable securities, but that improvement came with NIS 481.6 million of new long-term borrowing and NIS 149.6 million of fresh equity while short-term bank debt fell sharply.
Finding four: FX does not just help or hurt earnings. It also distorts the read on working capital. US and Korea inventory fell by NIS 4.5 million in shekel terms, but actually rose by USD 13.357 million in dollar terms.
What 2025 Cash Flow Really Says
The right frame here is all-in cash flexibility. This is not a normalized or maintenance cash-generation read, because the company does not disclose maintenance capex. The practical question is therefore straightforward: how much cash was really left after the year’s actual cash uses.
On that basis, 2025 was not a self-funded growth year. Operating cash flow was NIS 30.7 million. Against that, Scop spent NIS 45.4 million on property and equipment, NIS 6.1 million on intangible assets, NIS 7.4 million on lease principal, and NIS 59.5 million on dividends. Before debt service, the all-in picture is already negative NIS 87.7 million.
That is the core point. Cash on the balance sheet increased, but the business itself did not fund the year’s investment, lease, and distribution burden on its own. The balance sheet did the heavy lifting.
| Layer | 2025, NIS m | Why it matters |
|---|---|---|
| Net income | 154.0 | Headline profitability looks strong |
| Operating cash flow | 30.7 | Profit-to-cash conversion is much weaker |
| PP&E and intangibles | 51.4 | Real reinvestment in the platform |
| Lease principal | 7.4 | Recurring cash use, not an accounting line only |
| Dividends | 59.5 | Cash that left the business |
| All-in cash before debt service | (87.7) | The business did not fund the year on its own |
The financing section sharpens the picture further. Scop took in NIS 481.6 million of new long-term debt, repaid NIS 195.5 million of long-term debt, reduced net short-term bank debt by NIS 177.3 million, and raised NIS 149.6 million of equity. This was not a year of strong internal cash funding. It was a year of refinancing and term extension.
Where the Cash Got Stuck
The cash gap in 2025 was not caused by a collapse in the business. It was caused by the way Scop’s model consumes balance-sheet capacity when it grows. Customers absorbed NIS 79.2 million of operating cash, inventory absorbed NIS 120.2 million, and only part of that pressure was offset by NIS 24.2 million higher payables to suppliers and service providers and NIS 16.7 million higher other payables.
That matters more than any single line in the income statement, because it shows who financed the growth. Not customers paying earlier. Not suppliers extending meaningfully more credit. Mostly Scop’s own balance sheet.
| Component | 2025 operating cash impact, NIS m | What it says |
|---|---|---|
| Increase in receivables | (79.2) | More sales waiting to be collected |
| Increase in inventory | (120.2) | More stock sitting before realization |
| Increase in suppliers and service providers | 24.2 | Only partial funding from the chain |
| Increase in other payables | 16.7 | Partial relief, not a trend change |
| Increase in other receivables | (6.1) | Another modest cash use |
| Total working-capital and related drag | (164.6) | This is the main reason profit did not become cash |
The year-end balances point the same way. Inventory ended 2025 at NIS 931.8 million versus NIS 864.9 million a year earlier, and trade receivables at NIS 398.5 million versus NIS 337.9 million. That is not accidental. Scop is built around broad stock availability and customer credit, and more than 95% of Israeli orders are delivered within 24 hours. The same service model that creates the moat also creates the cash hunger.
The operating-day profile deteriorated as well. Inventory days rose to 269 from 249, customer days to 64 from 61, and supplier days stayed at 32. On a simple cash-cycle basis, inventory days plus customer days less supplier days stretched to 301 from 278. This is not an academic metric here. It is the clearest way to see that sales growth did not get matching cash support.
There is also one small disclosure with big implications. Scop says that because procurement shifted toward Southeast Asia, most payments to suppliers outside Israel are now made in cash. That helps explain why supplier days did not expand with revenue. In other words, part of the growth was financed with real cash, not with more supplier credit.
It is worth keeping proportion here. 2025 did not return all the way to the peak pressure of 2023, when inventory days were 276, but it clearly gave back a meaningful part of the 2024 improvement. The right read is not that Scop lost control. It is that the cash buffer narrowed again just as the company moves into another expansion stage.
FX Does Not Just Help or Hurt, It Also Distorts the Read
At Scop, FX is not only a financing line. It directly shapes how inventory, pricing, and cash move together. Management explains that the company updates shekel pricing in line with dollar moves, but also says inventory is much larger than liabilities to overseas suppliers. That means a weaker shekel increases supplier liabilities, but also lifts inventory value and later supports sales and gross profit when that inventory is sold. A stronger shekel does the opposite, liabilities fall, but inventory value falls as well and the pressure shows up later in sales and gross margin.
The important point is that the Israeli operation does not hedge its liabilities to overseas suppliers. Average foreign-currency supplier credit during the period stood at NIS 20.9 million, and 19.79% of Israeli sales are linked to foreign currency. At the same time, the company explicitly says the stronger shekel in 2025 materially moderated the increase in sales and profitability.
That already explains part of the pressure. But there is a deeper layer. In the directors’ report, Scop says US and Korea inventory declined by NIS 4.5 million in shekel terms. In the same disclosure, it adds that inventory in those operations actually rose by USD 13.357 million in dollar terms. That means part of the working-capital build was hidden by translation. The shekel picture looks easier than the economic picture really was.
The financial-instruments note confirms part of the exposure, but also shows the limit of that confirmation. The sensitivity table says a 5% move in the dollar changes pre-tax profit by NIS 7.355 million, while a 5% move in the euro changes it by only NIS 0.7 million. Useful, yes, but those tests are calculated on net financial balances at the reporting date. They do not fully capture the operating FX exposure that sits inside inventory and only reaches gross profit with a lag.
So the real conclusion is sharper than a simple sensitivity table suggests. The reported FX sensitivity is not the whole story. It captures the direct financial exposure. A meaningful part of the economic exposure is embedded in inventory and shows up later through sales and margin.
That is also why the finance line should not be read simply as “rates moved higher.” Net finance expense rose to NIS 28.4 million from NIS 20.4 million, and the company links that increase partly to FX losses caused by the stronger shekel versus the dollar. The same currency move that pressures sales and gross profitability also pressures the financing line.
Liquidity Looks Better, but It Is Financed
At first glance, it is easy to argue that the cash issue is less worrying because Scop ended the year with NIS 510.5 million of cash, short-term investments, and marketable securities, a current ratio of 3.48, and a quick ratio of 1.80. That is indeed a more comfortable liquidity picture than at the end of 2024.
But once the movement is unpacked, that comfort is clearly balance-sheet driven. Short-term bank credit fell to NIS 124.9 million from NIS 313.9 million. At the same time, loans from banks and others rose to NIS 848.9 million from NIS 568.2 million, of which NIS 241.5 million is current and NIS 607.4 million is non-current. Meanwhile, Scop took in NIS 481.6 million of new long-term loans, repaid NIS 195.5 million of long-term loans, and raised NIS 149.6 million of equity.
This is a good refinancing outcome, not evidence of strong cash conversion. Management bought time, pushed the debt profile outward, and reduced near-term pressure. That was the right move. It simply does not change the fact that the business itself produced very little cash relative to profit.
There is one important positive point. At group level there are almost no financial covenants. The group is not required to comply with covenants other than at Alinox in Poland, which must maintain equity above PLN 60 million, equity-to-assets above 50%, and an EBITDA-to-short-term liabilities plus interest ratio above 1.1, and currently complies. In addition, the group has total credit facilities of about NIS 1.81 billion, of which about NIS 1.00 billion was utilized near the reporting date. So this is not a squeeze story.
But even within liquidity, the quality is not uniform. Cash and cash equivalents stood at NIS 423.1 million, including about NIS 293.8 million of deposits. The company also notes that in Israel it holds NIS 125 million of longer-term bank deposits on which the full interest is received only if held to maturity. As of December 31, 2025, accrued interest on those deposits was NIS 31.08 million, but only NIS 14.48 million had been recognized as interest income at the reduced rate. That means not every part of the liquidity cushion has the same economic flexibility.
Another detail that reduces immediate risk is the rate structure. The company says long-term floating-rate debt is relatively low and short-term floating-rate debt is moderate. So the market is unlikely to judge 2026 only through an interest-rate lens. It will judge it first through working capital, FX, and whether growth finally starts to come back as cash.
What Needs to Change Now
The next read on Scop has to be much more cash-focused and much less headline-driven. More revenue will not be enough. The financing structure behind that revenue now matters at least as much as the sales number itself.
| Checkpoint | What needs to change | Why it matters |
|---|---|---|
| Cash flow versus earnings | Operating cash flow needs to move much closer to net income | Otherwise the balance sheet keeps funding the story |
| Inventory and customer days | They need to stabilize or fall after the 2025 deterioration | This is where the growth bill sits |
| FX read-through | The gap between shekel translation and original-currency inventory needs to narrow or be explained more clearly | Otherwise the real pressure stays obscured |
| Distribution discipline | Another dividend-heavy year before cash conversion improves would reduce flexibility | Because 2025 distributions already came out of a weak cash year |
The practical implication is straightforward. Scop does not necessarily need a new story. It needs proof that the existing model can keep growing without requiring more and more working capital for every additional shekel of revenue. If that happens, the higher liquidity at the end of 2025 will look like a smart bridge year. If it does not, 2025 will look like a year in which the balance sheet worked much harder than the operations.
Conclusion
Scop exits 2025 with a bigger cash pile, a better current ratio, and less short-term funding pressure. That part is real and constructive. But cash quality did not improve at the same pace. The gap between NIS 154.0 million of net income and NIS 30.7 million of operating cash flow, the rise in inventory and customer days, and the fact that FX masks part of the economic exposure all point in the same direction.
The thesis here is simple: 2025 was a well-financed growth year, not a self-funded one. Anyone looking only at year-end cash misses the amount of work the capital structure had to do in the background. Anyone looking only at working capital misses that the group is still far from a funding crisis, with large facilities and very limited group-level covenants. That is why the real test over the next few quarters will not be whether the cash balance remains high. It will be whether the business finally starts to produce that cash on its own.
Disclosure: Deep TASE analyses are general informational, research, and commentary content only. They do not constitute investment advice, investment marketing, a recommendation, or an offer to buy, sell, or hold any security, and are not tailored to any reader's personal circumstances.
The author, site owner, or related parties may hold, buy, sell, or otherwise trade securities or financial instruments related to the companies discussed, before or after publication, without prior notice and without any obligation to update the analysis. Publication of an analysis should not be read as a statement that any position does or does not exist.
The analysis may contain errors, omissions, or information that changes after publication. Readers should review official filings and primary sources before making decisions.